Unity revenue reaches $500m during Q1 2023

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Unity has released its financial results for the three months ended March 31, 2023, with strong revenues for the quarter but losses on the rise year-on-year.

The numbers

• Revenue: $500 million (up 56% year-on-year)
• Net loss: $253 million (up 30% year-on-year)
• Create Solutions revenue: $187 million (up 14% year-on-year)
• Grow Solutions revenue: $313 million (up 101% year-on-year)

The highlights

In the shareholder letter published alongside the results, Unity noted a strong Q1 2023 which exceeded revenue guidance previously shared (the company was expecting revenues of $480 million).

Looking at Create Solutions (Unity's business vertical that includes its games engine and "strategic partnerships"), revenue was up year-on-year.

"Given that our Strategic Partnership quarterly revenue is impacted by the timing of large deals, we are also providing our Create Solutions revenue excluding Strategic Partnerships, which was $170 million, up 17% year-over-year," the report read.

"This rate of growth is slower than our recent performance, as Weta is now in the base, and a slower rate of growth in Professional Services (PS) as we reduce our reliance on PS to drive adoption of digital twins."

Unity acquired VFX platform Weta Digital in November 2021 for $1.6 billion.

The report also noted "key wins within games," pointing to Unity's partnership with the Talking Tom & Friends titles developer Outfit7 (over 20 billion downloads) as well as Second Dinner's Marvel Snap reaching 18 million downloads during Q1 2023.

The report also addressed the recent news of 600 staff being laid off, which it described as "efforts to be more productive, streamlined and nimble as we continue to position Unity for long-term and profitable growth in an evolving economic environment."

The company also noted its strong position in the growing AI space, saying: "We embraced AI years ago and see the adoption of AI tools as an accelerant to our business based on our structural and sustainable competitive advantages."

Looking ahead, Unity expects Q2 2023 to generate between $510 million and $520 million in revenue, which would be between 72% to 75% growth over last year.

"Our assumption is that the ads market will be relatively flat quarter-over-quarter and that we will continue to gain share and perform ahead of the market," it read. "We are guiding adjusted EBITDA from $50 to $60 million, which takes into account the restructuring announced last week and represents another significant profitability increase from the -$38 million delivered in the second quarter of 2022."

The redundancies announced earlier this month were the third round of layoffs for the company in less than a year. Unity laid off 200 people in June 2022, and 300 in January 2023.

In his regular column This Week in Business, our very own Brendan Sinclair looked into the reasons behind Unity downsizing.

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